“How long is the new funding going to last you?” I asked “Sam,” an entrepreneur I’ve been working with.
Sam said, “About one year.”“That’s not long enough,” I replied. You really want your funding to last at least 18 months. Ideally, you’d like your funding to last two years.
“Why don’t you ask for more money?”
“We’ll suffer too much dilution if we do that,” Sam said.
I nodded my head.
“I understand where you’re coming from,” I said. “And your thought process is that if you raise less money now, you’ll be able to raise more money later at a higher valuation.”
You don’t want to get caught in the doom loop of not raising enough funding.
“Exactly!” Sam said.
“What if you can’t raise any more money?”
“What do you mean.” Sam said. “We’ll be able to raise more money later in the year.”
“Maybe, but maybe not. You’re trying to raise $6 million, so you’re dealing with VCs.
“The problem is your potential investors know that your funding is only going to last you one year. That means, once you close this round of funding, you’re going to have to start…
